- Your health insurance premium is the monthly cost of maintaining a policy.
- Factors such as the amount of your deductible, your plan’s network and your age affect the cost of your premium.
- If you have a marketplace plan, you may be eligible for tax subsidies that reduce or even eliminate your premiums, depending on your income.
If you’re reviewing your benefits package at work, you may think that the health insurance information is in a whole different language. Same goes if you’re shopping for a policy on the health insurance marketplace. Consider the terms thrown at you: provider networks, deductibles, coinsurance, premium. That last one is a crucial word to pay attention to because your premium is a cost you bear every month.
What is a health insurance premium? Simply put, it’s how much you pay the insurance company every month to keep your policy in effect. In 2022, the average marketplace benchmark health insurance premium is $438 a month. Many different variables affect the size of your premium, so it pays to know how premiums are set when you pick a health plan.
Other insurance costs
Your health insurance premium is only one of many costs of health care. You’re also responsible for:
This is how much you have to pay for covered health care services before your insurance kicks in.
You may have to pay this fixed fee for services, such as $20 per visit or $60 for a specialist appointment.
Coinsurance is a percentage of services that you have to pay—20%, say—after reaching your deductible.
These expenses make up your out-of-pocket costs. With employer plans that are compliant with the Affordable Care Act and plans purchased through the Health Insurance Marketplace, your out-of-pocket costs are capped.
For example, for 2022, the out-of-pocket maximum for a marketplace plan is $8,700 for an individual and $17,400 for a family, not including your premiums and spending on services that are not covered or out-of-network. Once you reach that threshold, your insurer has to cover the entirety of your covered medical services until the plan year ends.
Who Is responsible for paying health insurance premiums?
Depending on the type of coverage you have, you may get assistance with your premiums.
Employer-sponsored health insurance
According to the Kaiser Family Foundation, 59% of employers offer health benefits to at least some of their workers, and most workers with insurance have to pick up at least part of their premiums. In 2021, the average annual worker contribution was $1,299 for single coverage and $5,969 for a family plan.
If you don’t get insurance on the job—say you’re self-employed or an early retiree—you can purchase a policy through the Health Insurance Marketplace. With this option, you are responsible for paying the entire premium, but you may be eligible for subsidies that reduce the cost. There are two subsidies:
Advanced Premium Tax Credit
Depending on your income and the size of your household, you may qualify for a tax credit worth between $30 and $342 a month, which will reduce or even eliminate your monthly premiums.
In most years, the income limit for qualifying is 400% of the federal poverty level for your family size and state. For tax years 2021 and 2022, the credit was expanded. If you received unemployment for any week beginning in 2021, you can qualify for a credit.
If you find that you used a larger tax credit than you were due based on your income, you have to pay back the excess when you file your tax return.
Cost-sharing reductions are provisions of the Affordable Care Act that reduce out-of-pocket costs by offsetting the cost of your copays, coinsurance and deductible.
If you are a Medicare beneficiary, you typically don’t pay a monthly premium for Medicare Part A (hospital coverage). However, you do have to pay a premium for Medicare Part B (medical coverage). The standard Part B premium in 2022 is $170.10, but it goes up for higher-income Medicare enrollees. You may also have a premium for Medicare Part D, which covers prescription medications.
If you decide to enroll in a Medicare Advantage plan, premiums vary and are in addition to your Medicare Part B premium.
Low-income individuals can qualify for no-cost or reduced-cost health insurance through Medicaid. Medicaid eligibility and costs can vary by state, and states can charge limited premiums for certain income levels.
Choosing a health insurance policy
When researching your health insurance options, pay attention to policy premiums. You will likely have to pay at least a portion of this monthly cost of maintaining coverage if you have employer-sponsored coverage. If you purchase coverage through the Marketplace, you could be responsible for the entire premium. You can use a Marketplace Plan calculator to estimate how much a Marketplace policy would cost based on your location, family size and income.